Oxfam has taken aim at the increasing use of ‘blending’ private sector investment with foreign aid, in a wide-ranging report looking at the future of the Sustainable Development Goals (SDG)s.
The 45-page report, entitled “Accountability and Ownership: The role of aid in a post-2015 world”, is also severely critical of the new trend for donor countries to spend some, even a major percentage, of their foreign direct aid on themselves, to help with the cost of housing refugees.
Noting that Sweden – for example – last year spent some $2.4bn, nearly a third of its aid budget, on its own costs for housing refugees, the report calls the increase in so-called “in-donor” costs a “worrying trend”.
It also takes a swipe at the increasing use of the private sector in “leveraging” state aid.
Whilst not opposed in principle, Oxfam warns that “it is driven by market incentives, and thus cannot be expected to replace aid.”
Despite that, according to the OECD, in 2013 some $98bn of aid worldwide was allocated in support of leveraging private sector investment in developing countries.
It highlights the example of Liberia, which in March this year announced it was handing over all primary school education nationwide to a private firm – supported by donors financially – despite “the objections from education specialists and civil society organisations, including the national teachers’ union”.
Oxfam notes “it remains to be seen what role public institutions, particularly at local level, will have in oversight and accountability for the arrangement”.
The report concludes that rule changes that allow ‘blending’ are “complicated and unsupported by evidence.”
They add, “The blending of aid with private finance makes it much harder to track and measure impact.
“A major risk is that a greater share of ODA (Overseas Development Assistance) is that a greater share of ODA is diverted to support firms in donor countries with dubious development results, at the expense of aid that could be better spent by developing country partners.”
Although couched in diplomatic language, that is quite a serious charge from Oxfam, which is not known as being one of the more radical or outspoken major NGOs.
In another damning conclusion, the report finds that “private flows target richer developing countries.
“In 2013, countries with domestic public revenues of less than…$1,500 per capita attracted only one-fifth the per capita private investment of countries with greater domestic public spending.”
In other words, private companies are not interested – or cannot make sufficient profit – from the very poorest developing countries.
The 17 SDGs, adopted in 2015, replaced the more well-known Millennium Development Goals, which were largely met.
The MDGs – focussing on education and preventable diseases such as malaria – caught the public imagination, in a way that the more unwieldy, even vague Sustainable Development Goals have not.
Oxfam, one of the world’s biggest and best-known NGOs, states that: “At least some of the lessons of the MDG years appears to have been learned.
“However, the increasing diversion of aid to in-donor refugee costs, security concerns, or donor countries’ domestic private sectors undermines the political credibility of donors and their efforts to achieve the SDGs.”
Specifically, the report argues against the notion that economic growth alone is sufficient to meet development goals, because of the Catch-22 style trap of inequalities caused by economic growth than hindering poverty reduction.
The authors say, “Donor government must recognise that not all countries will be able to lift themselves out of poverty through growth, largely because inequality slows down poverty reduction.”
Instead, Oxfam calls for something it terms the “citizen-state compact” as central to the role of aid in the post-2015 environment.
And it warns “the approaches that donors employed for the MDG years era are out of date in the SDG era, when national accountability for delivery of the new goals will be paramount.
“Governments have the primary responsibility for making the investments necessary for all their citizens to achieve the SDGs so as to leave no one behind. Lasting progress is most likely when poor people and their governments can make their own decisions about how development finance is invested, and when citizens can hold governments to account.”
However, as the report points out, due to climate change and other factors, donor countries will in fact – Oxfam claims – have to increase their aid budget targets to more than the current aim of 0.7% of GDP.